If good Z is ‘inferior’; then an increase in income will cause:

demand for good Z will decrease

demand for good Z will increase

market price of good Z will increase

demand for good Z will not change

Demand for fish is higher in India than Australia because:

there are more buyers in the Indian market

the cost of supplying fish in India is lower than Australia

fish is an inferior good and people in India have less income

people expect fish to be cheaper in India

A demand schedule is a table showing the relationship between:

the price of a good and the quantity buyers are willing and able to purchase

the price of a good and the quantity supplied

income and the quantity of the good demanded

the determinants of demand and the quantity demanded

Economists can use which of the following to illustrate the law of demand?

A demand curve or a demand schedule

A demand schedule; a supply schedule and prices

A demand curve or a supply curve

A demand curve; a supply schedule and a demand schedule

The relationship between price and quantity supplied is:

the same as the relationship between price and quantity demanded

The global financial crisis was in part caused by many traders selling mortgage-based financial products all at the same time. Why might they have decided to do so?

they expected the price of mortgage-based financial products to fall in the near future

they wanted to supply more mortgage-based financial products to the market

they had found better products than mortgage-based financial products

the supply of mortgage-based financial products had fallen

New Zealand sphagnum moss is an input used in the production of orchids. If the price of sphagnum moss increases; but nothing else changes; this will cause:

the supply of orchids to decrease

the demand for orchids to increase

the supply of orchids to increase

the demand for orchids to decrease

A leftward shift of a product supply curve might be caused by:

an improvement in the relevant technique of production

a decline in the prices of needed inputs

an increase in consumer incomes

Whenever the price of a good changes in a competitive market it is NOT a result of:

a decision by a local farmer to stop selling the good

Suppose that the incomes of buyers in a particular market for a normal good decline and there is also a reduction in input prices. What would we expect to occur in this market?

the equilibrium price would decrease but the impact on the amount sold in the market would be ambiguous

the equilibrium price would increase but the impact on the amount sold in the market would be ambiguous

both equilibrium price and equilibrium quantity would increase

equilibrium quantity would increase but the impact on equilibrium price would be ambiguous

Which of the following would result in an increase in equilibrium price and an ambiguous change in equilibrium quantity?

a decrease in supply and an increase in demand

an increase in supply and demand

an increase in supply and a decrease in demand

a decrease in supply and demand

Economists use the concept of price elasticity of demand to measure how much:

buyers respond to changes in the price of the good

sellers respond to changes in the price of the good

worse off consumers are when the price of the good rises

demand responds to changes in buyers’ incomes

The elasticity of demand for toasted muesli would increase if:

the effect of a price rise was measured over a long period of time

there was an increase in complements for toasted muesli

the definition of the toasted muesli market was made very broad

toasted muesli was considered a luxury product

Holding all other forces constant; when the price of gasoline rises; the number of gallons of gasoline demanded would fall substantially over a 10-year period because:

buyers tend to be much more sensitive to a change in price when given more time to react

buyers tend to be much less sensitive to a change in price when given more time to react

buyers will have substantially more income over a 10-year period

none of these answers are correct

Suppose the price elasticity of demand for wine is 1.60. A 12 per cent decrease in price will result in:

a 19.2 per cent increase in the quantity of wine demanded

a 19.2 per cent decrease in the quantity of wine demanded

a 7.5 per cent increase in the quantity of wine demanded

a 7.5 per cent decrease in the quantity of wine demanded

The demand for rare butterflies tends to be income:

elastic because they are relatively expensive

inelastic because butterflies are small animals

elastic because most buyers feel that they can do without it

inelastic because butterflies are difficult to breed

Get Smart University (GSU) is contemplating increasing tuition to enhance revenue. If GSU feels that raising tuition would enhance revenue they are:

assuming that the demand for university education is inelastic

necessarily ignoring the law of demand

assuming that the demand for university education is elastic

assuming that the supply of university education is elastic

The price elasticity of supply measures how responsive:

sellers are to a change in price

buyers are to a change in income

buyers are to a change in price

sellers are to a change in buyers’ income

If the quantity supplied responds only slightly to changes in price; then:

the elasticity of supply is greater than one

the elasticity of supply is less than zero

the supply curve slopes upwards steeply

If law enforcement agencies prohibit the use of drugs such as heroin; cocaine and crack and the demand for drugs is inelastic; it is possible that:

the price of drugs will rise and drug-related crime will increase

the price of drugs will fall and drug-related crime will fall

the price of drugs will fall and drug-related crime will increase

the price of drugs will rise and drug-related crime will fall

Micro Econ

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MULTIPLE CHOICE QUESTION

1 min • 1 pt

Mark can cook dinner in 30 minutes and wash laundry in 20 minutes. John can cook in 15 minutes and wash in 30 minutes. How should they allocate work?

Mark should cook dinner based on his comparative advantage

John should cook dinner based on his absolute advantage

True

FALSE

Answer explanation

FALSE. The supply curve has a positive slope.

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Micro Econ

Mark can cook dinner in 30 minutes and wash laundry in 20 minutes. John can cook in 15 minutes and wash in 30 minutes. How should they allocate work?

Efficient allocation is based on comparative advantage. John's opportunity cost for dinner (0.5 laundry) is lower than Mark's (1.5 laundry); so John should cook.

A competitive market is one in which sellers and buyers can choose the price at which they wish to buy or sell goods.

FALSE. In a competitive market; buyers and sellers are price takers.

The clothing market is a good example of perfect competition.

FALSE. It is monopolistic competition due to product differentiation.

A market with many sellers offering slightly different products is called a monopoly.

FALSE. This describes monopolistic competition.

The computer software industry is an example of a perfectly competitive industry.

FALSE. High barriers to entry and unique products make it imperfectly competitive.

A game console and games designed for that console are substitute goods.

FALSE. They are complements.

The supply curve has a negative slope.

FALSE. The supply curve has a positive slope.

Equilibrium in a market is found where the supply curve and the demand curve intersect.

True. This is the definition of market equilibrium.

When analysing how some event affects a market; we check whether the price is the same as the quantity demanded.

FALSE. We check shifts in supply and demand curves.

It is not possible for demand and supply to shift at the same time.

FALSE. Both can shift simultaneously due to different events.

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